REDWOOD SHORES, Calif.--In a bid to compete better against IBM and
Hewlett-Packard, Sun Microsystems said Tuesday it will bundle Oracle's database with higher-end Unix servers and partially subsidize the fees customers would otherwise have to pay to use the software.

Oracle's Enterprise Edition database software will be an option when customers buy the four-processor Sun Fire V490 or higher-end servers using the . Sun will pay the Oracle license fee, but
customers will be responsible for paying Oracle's annual support and maintenance fees, said Larry Singer, Sun's strategic insight officer.

Because Oracle license fees correspond to the number of processors a server has, Sun's subsidy can be significant on machines such as the E25K, which has as many as 72 dual-core processors. Singer said the Oracle license fee for such as system is $850,000.

"The bigger the machine, the cooler this gets," Sun CEO Scott McNealy said at a Sun-Oracle employee town hall meeting at Oracle headquarters where the deal was announced. "We're going to effectively give you the Oracle database for free with a year of support with our new pricing model."

Oracle CEO Larry Ellison said the partnership shouldn't cause rivalries between the two companies' sales forces. "The Oracle salesperson gets credit for the Sun sale," Ellison said. "I think the Oracle salesperson will appreciate the help of the Sun sales force in making quota."

"In the last couple years, we've lost some of our momentum at the high end. This is about getting some of that momentum back," Singer said. Through the deal, running Oracle's database on Sun servers will be about 25 percent cheaper than on IBM's Power-based Unix servers or HP's PA-RISC based Unix servers, Singer added.

The database bundling deal should be available on Sun's Web site in coming days, Singer said. The partnership, which also involves joint marketing and advertising, doesn't currently extend to Sun's UltraSparc T1 "Niagara" systems or its "Galaxy" line of x86 servers.

Also Tuesday, the companies announced that technology for another 10 years. Oracle is rebuilding its applications using the software, Ellison said.

"You guys are signing up for another 10 years of collaboration and
cooperation," McNealy said, praising Oracle for its help developing Java. Oracle is "probably our No. 1 contributor here in the Java space," McNealy said.

The move comes a few months after another long-term Java licensee,
.

Best buddies
Having McNealy and Ellison share the stage was emblematic of the two companies' work in recent months to patch up their relationship.

The partnership is far from exclusive, however. Sun still includes other database software, including the open-source Derby, MySQL and PostgreSQL packages. "There's lots of choice," McNealy said.

And Oracle still has many other server partners. "We have a very close relationship with Dell," Ellison said.

The two CEOs joked genially on the stage. McNealy opened the event by asking whether Oracle planned to acquire Sun.

"You'll see it in the newspapers," Ellison responded. "Oracle's strong preference is to do everything hostilely."

And in showing a slide with Sun-Oracle partnership milestones, McNealy observed, "The one they didn't put in is when you and I were both pushing the network computer," the ill-fated thin client that both companies hoped would displace the personal computer.

"Let Google make the network computer now," Ellison said, a reference to the at the Consumer Electronics Show. "They're young and foolish."